California Resources leads losses for E&P sector as oil tanks; Intelsat ‘grinding’ higher; Endo trends lower

By Colin Hanner

Chicago, June 14 – The distressed debt market was “still quiet” on Wednesday, a trend that persisted the previous two sessions, market sources said, though exploration and production companies took some low blows after disparaging reports from the industry.

Reports from the Energy Information Administration and the International Energy Agency sent tremors into the bond market, with California Resources Corp., EP Energy Corp. and MEG Energy Corp., among others, down several points in line with crude oil prices.

“With oil reserves building, things are really getting wacked,” a trader said.

Satellite telecommunications company Intelsat SA was higher across two subsidiaries, though no company news drove the movement. Issues have been in flux since the company terminated an exchange offer and planned merger with OneWeb LLC but have been trending higher on the week.

A handful of health care-related names saw mixed movement with “a handful of trades” on the session, a market source said, including Endo Pharmaceuticals plc and Valeant Pharmaceuticals International Inc.

E&P down on oil lows

No news was good news for the exploration and production sector on Wednesday, with crude oil falling to monthly lows on the heels of reports from the EIA and IEA.

West Texas Intermediate crude was down nearly 4% to below $45 a barrel.

California Resources’ 8% notes due 2022 were down 4 points to 65 bid, 66 offered, a market source said. A trader said the notes were down 3 points to 65½.

Houston-based EP Energy’s 9 3/8% notes due 2020 were down 3¾ points to 85, a market source said, while the 8% notes due 2025 were down 3½ points to 78¼.

Canadian oil sands producer MEG Energy’s 7% notes due 2024 were down 1¼ points to 82.

Sanchez Energy Corp.’s 7¾% notes due 2021 were down 1 5/8 points to 91½, while its 6 1/8% notes due 2023 saw a 1¼-point decrease to 91½.

And African and South American-focused oil driller Tullow Oil plc’s 7¾% notes due 2021 were down 1 5/8 points to 91½.

The EIA reported weekly U.S. crude inventories decreased by 1.7 million barrels from a week prior, though an increase of 2.1 million barrels of gasoline inventories – “above the upper limit of the average range,” the agency said – drove the broader market downward.

According to media reports citing the American Petroleum Institute, crude inventories advanced 2.75 million barrels during the same period.

Looking further down the line, the IEA published a monthly report that predicted U.S. crude supply will end 2017 higher than it did at the end of 2016. Non-OPEC production will grow by more than double into 2018 from the current year, the report said.

“‘Whatever it takes’ might be the mantra, but the current form of ‘whatever’ is not having as quick an impact as expected,” the agency said of global efforts to curb the global supply glut.

Intelsat ‘grinding’

Two of Intelsat’s subsidiaries gained on the day, building into a recent pattern of higher movement after the company ended an exchange offer that caused a break-off with a planned merger with OneWeb.

Though no news has come up in the offer’s wake, the issues have bounced back.

“There was no news there, but they continued to grind higher,” a market source said.

Intelsat Jackson Holdings SA’s 7¼% notes due 2020 were up 3/8 point to 94 3/8.

Similarly-held 5½% notes due 2023 were up ¼ point to 84½.

Intelsat Luxembourg Holdings SA’s 7¾% notes due 2021 were up 1½ points to 59½.

And its similarly-held 8 1/8% notes due 2023 were up 1¼ points to 59¼.

Health care mixed

Lingering news from last week for Valeant Pharmaceuticals – the company sold its iNova Pharmaceuticals business for $930 million – has resulted in its bonds seeing steady gains, including some on Wednesday in two series of issues.

Its 6 1/8% notes due 2025 were down ¼ point to 83¼, and its 5 7/8% notes due 2023 were up ¼ point to 84, a market source said.

Endo International’s 6% notes due 2025 were down ¼ point to 83¼, while its 5 3/8% notes due 2023 were down 5/8 point to 84 7/8. Last week, the Food and Drug Administration asked Endo to voluntarily remove one of its opioid medications from the market.

And Franklin, Tenn.-based hospital group Community Health Systems Inc. saw a small bump in its 6 7/8% notes due 2022, which were up ¼ point to 88.

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